New Construction 221(d)(4)
Construction or Substantial Rehabilitation of Multifamily Properties
|Eligible Properties||Market rate, low-to-moderate income and subsidized family properties. Independent living facilities may qualify as long as all services are optional and fees from services and meals are not included in underwritten rents.|
|Commercial Space Limitation||Limited to 10% of gross floor area and 15% of gross income|
|Use of Proceeds||New construction or Substantial rehabilitation which is defined as:
a) Cost of improvements more than higher of:
i) 15% of post-rehabilitated appraised value, or
ii) $6,500 per unit adjusted for local high cost factor, or
b) Replacement of two or more major building components
|Davis Bacon Wages||Payment of prevailing wages is required by HUD; wages are determined by the Department of Labor.|
|Borrower||Single asset, special purpose entity, either for profit or non-profit|
|Loan Amount||No maximum (limited by loan parameters)|
|Interest Rate||Fixed for term of loan, determined by market conditions at time of rate lock (rate lock deposit is 1% and refunded at closing)|
|Loan Parameters||Maximum loan amount will be the lesser of:
a) A percentage of replacement cost, including as is value of land for new construction and as is value of property for substantial rehabilitation, as follows: (i) 83.33% for market rate transactions; (ii) 87% for affordable transactions; and (iii) 90% for projects with 90% or greater rental assistance.
b) FHA mortgage statutory per unit limits adjusted for local high cost factor, or
c) An amount that achieves a minimum debt service coverage, as follows: (i) 1.20 DSC for market rate properties; (ii) 1.15 DCS for affordable transactions; and (iii) 1.11 DSC for projects with 90% or greater rental assistance.
* Cost of offsite improvements, FF&E, marketing, construction contingency and operating deficit reserve excluded from loan amount.
|Term and Amortization||Actual construction period plus 40 years (fully amortizing with interest only payable during construction period).|
|Prepayment and Assumption||Negotiable with best pricing for 10 years of call protection (can be a combination of lockout and/or penalty); loan is fully assumable subject to HUD approval.|
|Escrows||a) Replacement reserves required in accordance with HUD guidelines
b) Taxes and insurance escrowed monthly (post construction)
c) Working Capital Reserve equal to 4% of loan amount (post in cash or LOC)
d) Operating Deficit Reserve equal to 3% of loan amount, or greater as determined by HUD at commitment (post in cash or LOC)
|Mortgage Insurance Premium||Payable at Closing in an amount equal to 0.45% of the loan amount for each year of construction|
|Fees and Expenses||a) HUD application fee of 15 basis points due with submission of pre-application and 15 basis points due with submission of firm application;
b) FHA Mortgage Insurance premium due at closing
c) Lender Financing and Placement fee up to 3.5% payable at closing; and
d) Actual cost of Third Party Reports.
|Third Party Reports||Appraisal, Market Study, Phase I Construction Cost Review, and Plans and Specs Review are required|
|Timeline||8-12 months depending on whether Borrower wants to submit a pre-Application|